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Bloomberg Law: New York’s Medicaid Budget Is Bleeding; Some Want Cash Infusion

January 21, 2020

New York is looking to overhaul its Medicaid program, which could mean cuts to hospitals, doctors, nursing homes, and other providers as the state aims to fill a projected $6.1 billion budget gap.

The cost of the safety net health-care program is a large portion of the deficit. Gov. Andrew M. Cuomo (D) briefly mentioned the shortfall in this year’s State of the State address and provided some insight as to how he hopes to plug it.

The state already has imposed some cuts—announcing in December a 1% reduction on Medicaid reimbursements—and Cuomo wants a restructuring of the program.

But the governor will likely face pushback from industry insiders striving to provide care with less money and lawmakers who think the answer is more tax revenue.

Reimbursement cuts have “the potential to jeopardize the stability of the marketplace,” Eric Linzer, president and CEO of the New York Health Plan Association, said. The 29 plans his group represents have been operating on thin margins for the past few years, he said.

Cuomo’s spending plan is expected to be released Tuesday and will kick off budget discussions for fiscal 2021, which begins April 1. The executive budget is expected to provide details on filling the $6.1 billion gap for fiscal 2021 and address a $4 billion Medicaid deficit for the current fiscal year.

Tax Hikes Coming?

Some Democrats, including Assembly Speaker Carl Heastie and leaders of both the Senate and Assembly Health Committees, are pushing to raise taxes on wealthy people instead of cutting programs.

“Our first choice should not be to cut services to those who are most vulnerable,” said Sen. Gustavo Rivera (D), who leads that chamber’s health committee. “We need to explore other options, including getting more revenues from those who can afford it.”

State spending on Medicaid nationally has increased in the last decade, particularly in New York and other states that choose to expand coverage under the Affordable Care Act. Costs are shared between the states that administer the program and the federal government.

Kicking Debt Down the Road

New York’s $174.7 billion budget for the current fiscal year, which runs through March 31, includes approximately $25 billion for Medicaid. Combined state and federal funding is about $73 billion for the program, which provides coverage to more than 6 million low-income New Yorkers, according to the state budget office.

To help fill the current hole, the state plans to delay $2.2 billion in Medicaid payments into fiscal year 2021 and make the delays permanent, effectively pushing debt into the future in perpetuity, according to the state’s mid-year budget report.

“It’s obviously just not good fiscal management overall,” said David Friedfel, director of state studies for the Citizens Budget Commission, a nonprofit fiscal watchdog group.

The state has yet to release details on how it plans to close the remaining approximately $1.7 billion gap before the current fiscal year ends, other than saying it will enact cost-saving measures. Savings may include reductions to rates paid to providers and health plans, as well as discretionary payments, according to the budget office.

Across-the-Board Cuts

Trade and health-care associations say the delayed reimbursement strategy affects cash flow for providers, particularly smaller institutions that don’t have as much of a cushion.

But the larger issue is the 1% cut in payments, which will equate to $496 million in fiscal year 2021 and subsequent years, according to the Health Care Association of New York State.

It’s difficult to be told what the reimbursement rates are going to be after the care has already been provided, said Ami Schnauber, vice president of advocacy and public policy for LeadingAge New York. That trade association represents nonprofit aging services providers.

“I absolutely think that you’re going to continue to see nursing homes close and most of it is related to the fact that they just can’t get the reimbursement that they need,” Schnauber said.

Medicaid Overhaul

The governor, in his Jan. 8 address, called the current situation “unsustainable” and referenced the state’s Medicaid Redesign Team, or MRT, which he created in 2011.

“We have restructured Medicaid before with our MRT program, and we’re going to have to do it again this year, and we will, and we can,” he said.

Assembly Health Committee Chairman Richard N. Gottfried (D) called the MRT largely a “sham.”

Many of the problems the state is experiencing came from changes made by the redesign, like moving toward managed care plans, he said. “I believe that the only responsible answer to this increase in Medicaid spending is on the tax side of the ledger.”

Cuomo’s first MRT made “real progress” and could do so again, said Bill Hammond, director of health policy for the Empire Center, a fiscally conservative think tank.

But much depends on the team, Hammond said.

“If it’s structured that same way, where the biggest recipients of Medicaid money are running the show, and the global cap has been weakened, and the governor’s political capital on this issue is diminished, the question is how effective will that be,” he said.